The Parable of the Common Beer Initiative

After experiences with the beer game, a team-based teaching exercise which provides participants with insights about systems performance, constraints, and supply chain management, senior management has decided to begin pursuing enterprise-wide standardization of company beer acquisition, utilization, and management processes. To be known collectively as our corporate Beer Strategy (or BS, for short), these governance approaches are being pursued to simultaneously improve productivity, increase morale, facilitate more efficient use of resources, and promote sharing of best practices.

To pursue these goals, a Beer Operational Synergy System (BOSS) was established to define and communicate the vision, mission, and principles of this initiative. This chartering action helped to frame the goals of the endeavor and establish expected behaviors of the supporting teams. However, given the complex use of beer throughout the organization, the BOSS left the details of beer scope, scenarios of usage, expected demand on the system, and selection of appropriate stakeholders for governance, to the beer consumers. They did feel that as the system were fully operational, it was essential for end users to 'consume BOSS beer as if it were their own'.

Different businesses in this conversation had quite different perspectives. Most were looking for a straightforward adoption of their own prevalant regional preferences, but no single choice would satisfy all needs, and so it quickly became clear that enterprise customization of COTS beers would likely be required. The challenge became determining which particular supplier should provide the baseline from which this customization should proceed from. As a result, a supplier selection was initiated through the Suds Management (SM) organization.

Selection of a set of standard criteria for these evaluation purposes seemed straightforward enough. However, those who were lucky enough to be involved in the initial trade studies quickly discovered how subjective such evaluations can be, and when they realized their own ‘beer of choice’ might not be the final standard. The adopted consensus was to have multiple standards adopted for different situations, but it quickly became evident that one of the key principles of standardization, saving money, might not be realized if multiple standards were indeed adopted.

When efforts to achieve greater rigor were then initiated, however, it quickly becomes evident that selecting the ‘best’ choice can be more about taste than how filling the beverage of choice actually is. It quickly became evident that selected beer suppliers were attempting to 'buy in' to a long-term contract, and promised new features (such as bigger bottles) that would enable their selection to be advantageous. Once the selection was made, however, the details of these features proved evasive, since the details of such commitments had not been clearly established. In parallel, internal customization efforts began in earnest, and involved such adjustments as changes to color, the addition of syrup flavoring (in a tip to the Starbucks crowd), and installation of labeling warning end users that consumption and design should not be performed concurrently.

Such debates paled in comparison to what occurred when a reconciliation of BS and company’s lean practices was attempted. As separate groups began their independent pursuits of the perceived value of this BS, they attempted to answer key integration questions on their own, such as:

• How will customer feedback be incorporated by the BOSS to enable production to be more easily integrated into the enterprise’s value streams?
• How will everyone in the organization adopt the commitment that their job is not only to run the BS business, but also to improve the BS business?
• How will the mix and volume of BS be used to reduce variation for both our internal processes and reduce chaotic surges on suppliers and partners?
• What approach will be taken for proactively keeping BS products and services operating with zero down-time?
• How will mistakes and near misses with BS be embraced to drive corrective actions, and achieve safe and effective workforce consumption?
• How will ethnic, religious, and cultural issues be reconciled with the BOSS?
• How will the BOSS’s inventory be managed to avoid the risks of heat, excess handling, and shelf life?
• In which areas should BOSS vertical integration be focused?
• To what extent will outsourcing of consumption be considered?
• How will supplier partnerships be affected by BS standards?

As solutions to all these issues began to be integrated, the Total Cost of Ownership of the BOSS became evident. Initially, to insulate users from these costs, end-using organizations were not directly billed for their consumption in dollars, but rather were allocated targets based upon 'Suds Consumption Resource Units', or SCRUs. This allowed the real cost of SCRUs to be adjusted independently of end-user consumption. As a result, a targetted end-user objective for beer consumption could never be reliably budgetted for by customers. This unfortunately caused many users to seek out 'alternative sources' for their beer, which led to a broadening, rather than narrowing, of the actual variety of beers in use over time within the target market. In response to this, the BOSS introduced a series of Beer Reduction Initiatives. None of these were very successful, though many were able to identify large quantities of empty bottles and recycle them for some cost savings. Ultimately, the BOSS determined that the best solution for the observed user reluctance in embracing BS was to ensure that the costs of BS would be spread across all potential users. This was accomplished through a newly instituted 'lip tax', which remains in place today. This tax has increased annually, even as utilization decreased; end-user studies of how this has impacted customer productivity will be performed as soon as additional funding for this purpose can be made available.